Thank you for standing by, and welcome to the Garmin Ltd. second quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star one one on your telephone. As a reminder, today's program may be recorded. Now I'd like to introduce your host for today's program, Teri Seck, Director of Investor Relations. Please go ahead. Good morning. We would like to welcome you to Garmin Ltd. second quarter 2022 earnings call. Please note that the earnings press release and related slides are available at Garmin's Investor Relations site on the Internet at www.garmin.com/investors. An archive of the webcast and related transcript will also be available on our website. This earnings call includes projections and other forward-looking statements regarding Garmin Ltd. and its business. Any statements regarding our future financial position, revenues, earnings, gross margins, operating margins, future dividends or share repurchases, market share, product introductions, future demand for our products, and plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur, and actual results could differ materially as a result of risk factors affecting Garmin. Information concerning these risk factors is contained in our Form 10-K filed with the Securities and Exchange Commission. In particular, there is significant uncertainty about the duration and impact of the COVID-19 pandemic. This means that results could change at any time, and any statement about the impact of COVID-19 on the company's results could change at any time. Business results and outlook is a best estimate based on the information available as of today's date. Presenting on behalf of Garmin Ltd. this morning are Cliff Pemble, President and Chief Executive Officer, and Doug Boessen, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Cliff Pemble. Thank you, Teri, and good morning, everyone. As reported earlier today, consolidated revenue came in at $1.24 billion, down 6% from the strong pandemic driven comparable of 2021. We generated $293 million of operating profit for the quarter, which was down 21% from the prior year, and operating margin was 23.6%. Our performance in the quarter was influenced by several factors. First, the U.S. dollar strengthened significantly over the prior year relative to other major currencies, and unfavorably impacted second quarter revenue by approximately $57 million. Our strategy for managing currency fluctuations of this nature is to increase prices where we are able and reset pricing as we introduce innovative new products. We believe this approach is very effective in managing currency changes over the long term, but the rapid and relentless strengthening of the U.S. dollar will be a significant headwind for the remainder of the year. From a business segment perspective, underperformance in fitness had a significant impact on our results, which I will cover in more detail in just a moment. Finally, we continue to experience supply chain constraints, which limited the orders we could fill in the quarter, specifically in marine and aviation. Considering our performance so far, we're adjusting expectations for the remainder of the year. We now anticipate revenue of approximately $5 billion, which is flat to the prior year, and EPS of $4.90, representing a year-over-year decline of approximately 16%. This new guidance assumes currency exchange rates stabilize at current levels, and we have adjusted growth expectations for fitness and marine, which reflect the current trends. Doug will provide more details on our financial results and updated guidance in just a moment, but first I'll provide highlights on the performance and outlook of each business segment. Starting with fitness, revenue decreased 34% to $272 million. Gross and operating margins were 49% and 9% respectively, resulting in operating income of $23 million. The second quarter decline was broad-based, impacting all categories in the segment and was primarily driven by demand normalization in the advanced wearable and cycling categories. These are categories which benefited significantly from pandemic-fueled demand in the first half of 2021. Although our Q2 performance was disappointing, we are encouraged by the response to our new product introductions. During the quarter, we celebrated Global Running Day with the launch of two new running watches, the Forerunner 255 and the Forerunner 955. The Forerunner 955 solar version is our first running watch with solar charging capability, which provides up to 20 days of battery life in smartwatch mode. We also launched the Edge 1040 cycling computer, featuring solar charging capability for superior battery life and multi-band GPS technology for accurate high performance positioning in the most challenging ride environments, such as those found in urban areas or dense tree cover. Given the year-to-date performance and current trends, we now expect fitness revenue to decline 25% for the year. Moving to outdoor, revenue increased 18% to $382 million, with growth across multiple categories led by adventure watches. Growth and operating margins were strong at 66% and 40% respectively, resulting in operating income of $154 million. During the quarter, we launched the Tactix 7, a premium smartwatch with unique capabilities such as night vision compatibility, as well as advanced tactical performance and risk-based navigation features. The outdoor segment has been a strong performer so far, and we are maintaining our revenue growth estimate of 20% for the year. Looking next at aviation, revenue increased 13% to $205 million, driven by growth in both OEM and aftermarket categories. Gross and operating margins were strong at 72% and 30% respectively, resulting in operating income of $62 million. During the quarter, supply chain constraints eased, bringing back orders down from historically high levels, but we have more work to do to meet the strong demand for our products. We recently announced that we now have more than 25,000 integrated flight decks in service across a broad range of applications from piston trainers to transcontinental business jets. This achievement demonstrates the unmatched versatility and capability of our integrated flight deck systems. The aviation segment has delivered solid performance so far, and we are maintaining our revenue growth estimate of 10% for the year. Turning next to the marine segment, revenue decreased 7% to $243 million. Demand for our products was even higher than it was during the historic second quarter of 2021, but we were unable to satisfy all of the demand due to supply chain constraints. Growth and operating margins were 57% and 28% respectively, resulting in operating income of $69 million. Since it was first introduced in 2018, our LiveScope sonar system has been a game changer for the inland lake fishing market and has been a growth catalyst for the marine segment. We recently expanded our product lineup with the introduction of the LiveScope XR system, which operates at greater depths and expands the addressable market for live action sonar to coastal and deep lake fishing applications. We're excited to bring LiveScope technology to the deep fishing market and believe it represents another growth opportunity for the marine segment. Given our performance so far this year and the anticipated return of normal seasonality patterns in the marine market, we will now expect revenue growth of 5% for the year. Looking finally at auto revenue decreased 6% to $139 million, with declines in both consumer and OEM categories. Consumer was impacted by lower sales of consumer PNDs, while OEM was impacted by reduced orders from automakers who faced their own supply chain challenges. Gross margin was 40%, and we recorded an operating loss of $15 million, driven by ongoing investments in auto OEM programs. During the quarter, we entered a new product category with the launch of our first dēzl Headset, offering truck drivers high quality audio, up to 50 hours of continuous talk time, and unique integration features with our dēzl navigator units. While the first half of the year has been slightly below expectations, we believe growth will resume in the second half as automaker production improves. As a result, we are maintaining our revenue growth estimate of 5% for the year. In closing, while we are facing a variety of headwinds, it's important to remember our diversified business model provides many opportunities for growth within each segment. We have a very strong product lineup and more new products are on the way. We remain focused on what we can control, and we'll be agile and opportunistic as we navigate the evolving macroeconomic environment. That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug? Thanks, Cliff. Good morning, everyone. I'd like to begin by reviewing our second quarter financial results, provide comments on the balance sheet, cash flow statement, taxes, and updated guidance. We posted revenue of $1,241 million for the second quarter, representing 6% decrease year-over-year. Gross margin is 58.7%, actually flat compared to the prior quarter, as favorable segment and product mix offset the unfavorable impact of foreign exchange rates and higher freight costs. Operating expense as a percent of sales was 35.1%, 230 basis point increase the prior year quarter. Operating income was $293 million, a 21% decrease. Operating margin was 23.6%, 440 basis point decrease. Our GAAP EPS was $1.33. Our former EPS was $1.44. Next, look at our second quarter revenue by segment and geography. In the second quarter, our growth in the outdoor and aviation segments were more than offset by declines in the fitness, marine, and auto segments. By geography, America's region was flat, contributed about half our revenue for the quarter. The EMEA and APAC regions, both impacted by foreign exchange rates, declined during the quarter. Looking next at operating expenses. Second quarter operating expenses increased by $26 million or 6%. Research and development increased $15 million year-over-year, primarily due to engineering personnel costs. SG&A increased $10 million compared to the prior quarter, primarily due to increases in personnel-related expenses, information technology costs. Our advertising expense is relatively consistent year-over-year. The highlights on the balance sheet, cash flow statement, and taxes. End of the quarter, with cash and marketable securities approximately $2.9 billion. Accounts receivable increased sequentially to $699 million, following a seasonally stronger second quarter, and declined year-over-year relatively in line with our sales decline. Inventory balance increased year-over-year to approximately $1.5 billion. We're executing our strategy to increase days of supply to support our increasingly diversified product lines, optimize the mix of ocean versus air freight shipments, and to carry sufficient levels of raw materials safety stock to mitigate increased lead times. During second quarter 2022, we generated free cash flow of $5 million, a $115 million decrease from prior quarter, primarily due to lower operating income and increased operating capital needs. The capital expenditures for second quarter were $75 million. We expect full year of 2022 free cash flow to be approximately $500 million, capital expenditures approximately $300 million. Also during the quarter, we paid dividends of $129 million. We purchased $31 million of company shares, leaving $260 million remaining share purchase program authorized through December 2023. For the second quarter of 2022, an effective tax rate of 7.6% compared to 14.8% the prior quarter. The decrease in effective tax rate is primarily due to income mix by tax jurisdiction and increase in U.S. tax deductions and credits. Turning next to our full year guidance. We estimate revenue of approximately $5 billion compared to our previous guidance of $5.5 billion. As previously mentioned, the strengthening of the U.S. dollar had a significant unfavorable impact on our second quarter revenue. Assuming the euro will be at parity with the U.S. dollar for the remainder of the year-over-year unfavorable revenue impact will accelerate in the back half of 2022. We expect gross margin to be approximately 56.7%, which is lower than our previous guidance, 57.5%, primarily due to the anticipated full year unfavorable impact of foreign exchange rates. We expect an operating margin of approximately 20%. We expect an effective tax rate of 8.5%, which is lower than our previous guidance of 10.5% due to projected full year income mix by tax jurisdiction. This results in expected pro forma earnings per share of approximately $4.90. This concludes our formal remarks. Jonathan, could you please open the line for Q&A? Certainly. Once again, if you have a question at this time, please press star, then one, and one again. One moment for our first question. Our first question comes from the line of Paul Chung from J.P. Morgan. Your question please. Hi, thanks for taking my question. Just first up on fitness, you know, where are we on kind of the channel levels on, you know, some of the cycling products and, you know, what's been the initial demand kind of feedback for refreshing some of the Forerunner lines, including the 955? You know, and how should we think about kind of the seasonality for the balance of the year for fitness? Yeah. I have a follow-up. Okay. Good morning, Paul. Channel levels in cycling, I'd say you have to kind of look at two different sides of that. One is the cycling computer side and the other is the indoor trainer side. The cycling computer side and the response to the new 1040 is very good. The inventory levels at the channel I think are fine. The indoor cycling side of things with the Tacx trainers, I think generally the market right now is heavy on inventory of all kinds of trainers from every manufacturer. There's kind of a backup at retail of those products which impacts our sell-in. It's going to take some time, I think, for retailers to work through that. In general, the retail demand is generally what people would expect for this time of the year. It's not really the season yet in the northern hemisphere and we should see improved retail sales in the back half as winter approaches. In terms of the other fitness products, the 955 and the 255, the demand has been very good. We're working through actually back orders on those as well. Great. On aviation, you know, you saw some record kind of quarterly revenues kind of resulting in, you know, very nice operating leverage for the segment. Now it's above that 30% mark again. You know, can you expand on, you know, some of the strength you're seeing in the segment on a product mix, market share? And you've kind of provided the revenue outlook, but how should we think about the margin outlook for, you know, aviation in the second half? Definitely a good quarter. I think that we were able to catch up on some of our lingering back orders in the segment. Most of those were targeted to the aftermarket. Our both sides of the aviation segment, the OEM side and the aftermarket, grew in the quarter. We expect that to continue in the back half because OEMs of course are We're working to fill the back orders that they have for airplanes, which are still very strong and we're still catching up on orders in the aftermarket side of things as well. In terms of market share, as we said before, we're very strong in everything from the piston singles on up through the mid-size business jet, and we continue to win more platforms in those categories and are working on new projects to build our revenues for the future. Margin wise, I would say that aviation has been very solid when it comes to our margin profile. You know, in that 70% margin range for gross margin, which funds a very heavy R&D investment to create the products that we offer. Kind of that mid- to upper-20% range for operating margin is kind of the sweet spot. As we get more leverage, of course it goes up. Generally we tend to target in that range. Great. Then lastly, if I could fit one more in. Outdoor, you know, very strong quarter with the refresh of the fēnix, despite some tough comps, you know. How is the sell-through kind of tracking there and, you know, the status of the channel there? Do you have a sense for kind of upgrade versus new users to the platform, particularly for the fēnix? Any thoughts there would be great. Thanks. The refresh has gone very well. I think it's taken us some time, but we're getting close to being caught up on the initial demand for the fēnix and the epix since it was launched earlier this year. There's still some pockets of lingering back orders in those categories that we're working to catch up on. In terms of the channel, we think it's very healthy and seems to be normalizing right now with kind of the sell-in, sell-through being balanced. In terms of user profile, we're seeing pretty much what we have seen in recent launches, which is roughly about half of our users coming into those families are new users. We have upgrade users coming from all kinds of products from much older generation fēnix to even our advanced wellness customers who are looking to upgrade to a more capable watch. Great. Thank you. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Ben Bollin from Cleveland Research. Your question please. Good morning, everyone. Thanks for taking the question. Cliff and Doug, I had a bigger picture question on inventory levels. When you think about your current balance sheet and the exposure to inventory, I know there's been some targets to build that. How have those thoughts evolved? Then, a follow on, based on the behavior you're seeing from your partners, your go-to-market partners, do you have any thoughts about what they're thinking about, going into the holiday selling season and their overall commitments to inventory levels from where they stand right now? Yeah. Maybe just a high level comment on our overall inventory. As you know, component lead times have been very long, and so in order to ensure we have the materials to be able to meet demand, we've had to increase our weeks of supply on the raw material side. In some cases we've been faced with what were typically before the pandemic, you know, 13 to 26- week lead times, now extending 26 to 52- week lead times. It's a very challenging situation. What we don't want to do is be left with demand with no inventory to build. Additionally, on the inventory side, the freight side of things has been really challenging. In order to solve the freight cost issue, we have to have more inventory coming on boats, which is a lower cost mode of shipment. That takes a very long time, and so it simply just extends the amount of inventory that we have to carry. We feel like the inventory we have is good inventory. We're very versatile. We can reuse components and materials that we have across many different product lines. We feel like in general, the most of our product lines are solid long-term, long life cycle products that we can sell over time. We feel very good with where we're at right now. In terms of go-to-market and their outlook for the upcoming holiday season, it's still early days, so there's work being done to finalize all of that. The early indications that we have in some of the segments is a very strong commitment to promoting products in big quantities for the holiday season. That's what we know so far. Again, it's probably very early days. Okay. One follow-up would be, specifically as you look at the outdoor business, for the adventure watches, how are you thinking about the performance of that business through year end? How are you balancing, you know, the potential risks of maybe you've already seen some pull forward, you just haven't seen it yet given the refresh versus, you know, the stronger underlying secular demand? That's it. Thank you. Our guide for the year is up 20%. We had a strong first half, so as you can infer from the data, we expect that will moderate in the back half. We believe our product line is very strong and we believe that is achievable right now. We also have more new products coming, which should boost our overall ability to grow in the back half. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Nikolay Todorov from Longbow Research. Your question please. Yeah. Thank you, and good morning, everyone. First question on marine. I guess, Cliff, can you talk about where do you see the constraints? I know you had some constraints in the prior quarter, but it seems like they have worsened. Also, it seems like you're building still a strong backlog. How much of that do you consider perishable, given the macroeconomic backdrop? The constraints, Nick, I would say they're not worse, but they in some cases didn't get much better during the quarter. The main issue there was with key components for our chart plotters in order to be able to deliver those higher-end plotters, and we prioritize customers in the segment that impacted our selling prices. In general, I would say the backlog, we've made some progress into Q3 in covering some of that. We are assuming that we'll have a greater level of seasonality more typical of the segment. Q2 is usually the highest quarter of the year, and then it falls off as people in the northern hemisphere bring their boats out of the water and put them in storage, and they wait to upgrade boats and work on them in the spring. We're assuming some of that may be deferred, but that's why we brought our guide down to about 5%. Okay. Then second question I have is that maybe on the OpEx side, maybe can you talk about what are the changes you're implementing following the revision in the outlook? How is the OpEx lines changing, given the new outlook? Yeah. I think we're definitely taking a look at that, and we're looking at two different areas. You know, we're being very selective in our hiring to make sure that we don't outgrow our revenue growth. We're also looking at our general OpEx, focusing on priorities and essentials and making sure that we narrow the priorities to the most important things. We're trying to manage that and steer it for the long term. Okay. Last one, if I can squeeze. Fitness gross margin, should we expect, given the current environment and the inventory overhang, that high forties is kind of the norm in the near term? Or is there any potential puts and takes that can change the direction? Yeah. In the fitness gross margins, a lot of, as you said, puts and takes in it. You know, we did see some unfavorability relating to the foreign exchange rates, which we would anticipate that to continue in the back half. You know, Cliff talked about also freight. You know, freight's also been impacting our gross margins also there from that standpoint. You've seen some of the other segments that may have seen some improvement in there, like outdoor, you know, from product mixes where they have and some things where watches higher percentage of those. But it was really gonna be, you know, function of, you know, what is that product mix portfolio that makes up that, the fitness side of things. Probably I'd say, as you said, probably similar to what Q2 indicated will be our gross margins as we go forward, but we do have some headwinds there we're currently facing. All right. Thanks, guys. Good luck. Thank you, Nick. Thank you. One moment for our next question. Our next question comes in the line of Ivan Feinseth from Tigress Financial. Your question, please. Thank you for taking my question, and congratulations on the good aviation performance. Following the introduction of the dēzl Headset, do you think there's an opportunity for you to expand into aviation cockpit headsets, considering that's really only dominated by two companies and none of those have the cockpit presence that you have? Yeah, I think Good morning, Ivan. We're really excited about the dēzl. As I've mentioned many times in the past, our strategies for growth are introducing new products and new product categories, entering new markets, and this reflects that commitment. Right now we're focused on attacking the opportunities on the truck side, and then we're exploring other avenues where this kind of technology might be useful. Now based on your overall bigger picture hiring and space expansion plans in Olathe, do you think that some of what you're going through that you're seeing right now is just more of short-term headwinds, and what do you feel the bigger picture growth opportunities continue to be? Well, of course, I think everyone hopes that the economic situation is short term, but none of that has really proved to be true. We're making sure we're managing the business for the long term. We are in need of more space in Olathe, particularly to be able to bring more people back onto campus and also focusing on those priorities that we have, particularly needing more people in aviation and some of the consumer areas as well, and balancing our overall hiring needs. We're committed to building out and finishing our space expansion here in Olathe. Then I think we're in good shape when it comes to overall space. Accommodations for our people for the next kind of phase of growth. All right. In upcoming new products, can you give us, you know, some idea of the areas that we should be stay tuned and focused on where we'll see some new products introduced this year or the second half of this year? Well, we have introductions planned in most every segment. Stay tuned, but I'm pretty excited about some of what's coming. All right. Thank you very much. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Erik Woodring from Morgan Stanley. Your question please. Hey, good morning, guys. Thank you for taking my question. Maybe, Cliff, I'll start with a kinda high level question for you and then ask one for Doug. You know, I think, you know, as we've gone through the pandemic and now kind of in this quasi-pandemic stage, you know, consumer electronics have gone through, you know, a near record period of elevated demand that some could now say is normalizing. I would just love to get your take, Cliff, on just how you think about the TAM for your consumer facing businesses. Do you think it's permanently larger today than pre-COVID levels? Is there a risk that it returns? Just high level thought process on how you're thinking about the TAM as we move kind of past the peak of the pandemic. Thanks, Erik. Yes, I think that the pandemic certainly highlighted to people the importance of health and wellness and fitness. I believe that change in people's focus probably is a very long and enduring mindset. We did experience a lot of new demand and had new customers coming into our ecosystem. I believe that's a longer term opportunity than as they use those devices and then look for a device with new capabilities, they will then look to Garmin for an upgrade. I believe that creates an enduring customer base for us and leads to opportunities in the future. Okay. That's helpful. Maybe Doug, you know, by my math, kinda gross margins in the second half will be a bit below 56%. Operating margins will be around 18.5%. Is there any way you can just kinda help us quantify the impact of the various factors impacting kind of this new lower second half margin outlook? Yeah. Well, a big factor of that is foreign exchange rates. So as I mentioned, you know, assuming parity for the euro and U.S. dollar, we should expect the year-over-year impact change to accelerate. For instance, in Q2 of last year, 2021, we were about 1.20. Then this year, the average for Q2 2022 was about 1.07, and then it went to, I think, 1.18 and 1.15. Then if you assume parity, which is similar to where we're at right now, that year-over-year change will accelerate. That is impacting, you know, our gross margin there as well, you know, for the bigger piece of that piece. But then also as we mentioned, you know, freight as something, you know, we are managing through that also. Maybe if I could just clarify, would you say that FX is the only kind of incremental headwind, or would you say freight is now more of a headwind than you expected 90 days ago? You know, it's interesting, freight. You know, freight was probably the biggest story, you know, maybe a couple quarters ago, we were year-over-year. Now, as Cliff mentioned, you know, we are managing a piece of that, as it relates to our inventory levels. We are trying to have a larger percentage of our shipments on ocean versus air, which is helping that. Also, on a year-over-year basis, you know, we saw some of those large increases last year in the rates. I'd probably say some of those rates are maybe a little bumpy here too, but more or less stabilizing. There will probably, you know, be some ups and downs, you know, on freight, you know, through the back half of the year, kind of see what's going on with the rates, whether ocean or ocean air. It won't be as significant of a driver as the FX foreign exchange rates, which I think are gonna be, you know, a bigger item that we're gonna be headwind against in the back half. Okay. Thank you so much for the color, guys. Thank you. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Teri Seck for any further remarks. Thanks, everyone, for your time. Doug and I are available for callbacks. Have a great day. Bye. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.